Back to CSR - ITC's AGM Speech

Some time back I had written about the AGM Speech of HUL and its focus on CSR. On 27^th July the AGM speech by Y.C. Deveshwar of ITC had the heading 'Making Markets Work for CSR'. The AGM speech of two of our major FMCG companies has CSR as the main focus. This makes one think why is the sudden interest on CSR in the country??? To be fair to ITC, the company has not tried to fit CSR and social benefit into the cigarettes that it sells as was the case with HUL. Y.C. Deveshwar in its AGM speech has spoken more about their ITC echoupal and other initiative in the rural areas in the country. The speech touched upon the returns that a company would or should expect from the CSR initiatives, and how market forces should make CSR a crucial component of share holder value creation so that these initiatives are driven by market forces and not inspired by corporate conscience alone. One can listen to the audio files or watch on demand video of the speech on their website.

Indian Social Networking Sites

The launch of 'ishare' a social content sharing platform by rediff.com has prompted this write-up. Though for most of us who spend considerable time on the internet orkutting, the addition of one more social networking site is not a news worth mentioning. In India orkut is by far the leading social networking site, followed by Hi5 with a very small share and even smaller for Friendster and Fropper. 'ishare' promises a host of activities for the members, including sharing of video, music and picture. But will an avid orkutter really switch over to 'ishare'.

One social networking site in India which made a lot of buzz was the sunsilkgangofgirls.com launched by HLL. The total number of registrations at the site is 5.8 lakhs plus. The site offered a platform for girls to share their hobbies, interests online with community members. The site has blogs, expert advice and jobs. The site is considered to be a success but the issues of retaining interests of the members would mean constant innovation and addition of activities for the members.

The value of a network is proportional to the square of the number members using the same, a single stand-alone phone would have no value in itself, but once it is connected to a network the value of the phone increases exponentially. This law is called the Metcalfe's Law. For the Indian social networking sites to succeed they will have to work through the principle, as the existing players have a head-on advantage..

ET Front Page News - Acquistions, growth and Rs 1 Trillion

The very first blog which i had written was on the growth in the Indian markets. In Today's Economic Times the front page has three different pieces of information, the first one is the possibility of Tata Motors being the forerunners in acquiring Land Rover and the Jaguar at around $ 1.5 Billion. Second is the news of an addition of 5.6 million users in the fastest growing cellular market in world, and the doubling of Bharati's Profits. Last bit is the Rs 1 trillion volume in the markets on thursday for the first time (though latest news the sensex has dropped by 500 points !!!!).

Though the first news that Tata motors in the acquisition mode might be considered as no news at all after the acquisition spree that Indian companies are in..... but still this acquisition would bring into the Tata Portfolio two very powerful Brand names. The addition of new subscribers into the mobile telecom network also would be considered as a stale news. The 1 trillion turnover in the markets would raise a few eyebrows, but I see the significance of the fact that they have all come on the same day and are on the front page, which empassises the boopm that Indian markets are going through.....

More cars in rural india

The previous blog on rural marketing spoke about the sales of Alto and Maruti 800's in rural India. I got an interesting news item on the sale of SUVs in rural India "Rural India driving high-end car Sales" thought I should share it.

Potter Mania in India………….

If one had walked into any of the book stores across the country on Saturday last he would have got confused whether he was in a book shop or a pet store with all the owls floating around ... as I was when I visited crossword and landmark in Vadodara. It was the launch of the seventh and the last of the Harry Potter series "Deadly Hallows" which had all the book chains in the country dressed-up for the occasion. In the past one month I have seen many school children walking into the book shops and booking their advance copies. The interest with which the children came and booked their orders made one realize the strength of the brand. Though the response for the book in the country has been quite good, but I personally feel that the brand is in no way as big as it is in US and UK. My casual inquiry with the sales person at the counter in crossword revealed that they had an advance booking of around 400 and of which 300 had been picked by mid-afternoon. The overall country level figures also show the same, of more than 2 million copies pre-ordered worldwide only 2, 40,000 were from India. In US sales of the seventh and final Harry Potter volume hit an estimated 8.3 million in the first 24 hours, making it the fastest selling book in the history of books. One of the major reasons for the below par response for the book from India would be the cost, even at the discounted price of 750/- it is still costly for many of the school going children, despite all the hype these people will wait for the pirated copies to come on the streets and then read it. Even the company estimates that it would be losing close to 50 percent of its sales to piracy.

Outsourcing Marketing?? - Lenovo's Marketing Hub in Bangalore

When the Chinese PC giant lenovo acquired IBM's PC business for $1.75 billion in cash, stock and debt in one stroke, it vaulted from being the world's eighth-largest PC maker to the third-largest, after Dell and Hewlett-Packard. The brand Lenovo chalked out a five-year transition to switch to a Lenovo-only brand -- it has a five-year brand licensing agreement with IBM to use its brand. The branding initiatives of the company have been criticized by many marketing experts like Ries& Ries.

The latest development in the marketing front involves making Bangalore the global marketing hub from where it would drive all the marketing initiatives of the company. The hub is expected to formulate marketing strategies and create marketing deliverables for print and online. It will also track the effectiveness of the marketing campaigns launched by the company around the world.

There are many reasons for the choice of India as a Hub for its global marketing activities, some as stated by the company; Indian marketing and creative team is currently its best and has the experience of building brands from scratch. Others include the fact that they want to route all their marketing deliverables including advertisements and brouchers through the hub and thus avoid duplication and the obvious advantages of reduced costs of having it done in India.

Another reason part from the talent and cost savings by shifting operations to India is that by doing so they would be closer to a market which they consider to be one of the most important one in their future growth plans, but the question is outsourcing Marketing activities to India the same as outsourcing your call center activities or maybe your pay roll processing? Is it not going back to the centralized system, where the marketing people would be too far from the markets in which they operate???

Rural Marketing Case 1 : Maruti in Overdrive mode in Rural India

MUL has started targeting the rural markets aggressively, with an ambitious rural marketing drive. It has tie-ups with Regional Rural Banks for car finance. The campaign which started early this year , has started showing results. The rural sales figure stands at 2,700 cars and generated about 20,000 inquiries through its rural scheme. The break-up for the cars shows 50% of the cares sold were Alto and 20 % Maruti 800. The success is attributed to the increased focus on these markets and the appointment of Rural Sales Executives by dealers. The number of Rural Sales Executives is at 1500 and many more will added according to the company sources. These Rural Sales Executives belong to the same area and are stationed there itself. Through this the company is aiming at improved interaction and more conversion and improved comfort level with the sales personnel.

Apart from the dealer network the company has been an active particpant in the major Melas in the rural areas. Last one year has seen the presence of Maruti in rural melas like the Kisan Mela (Ludhiana), Sonpur Mela (Bihar), the Kila Raipur Sports Mela (Punjab) and Pushkar Mela (Rajasthan). The Melas provide both a platform for demonstration and improving product awareness, but also to book cars. One the schemes offered in the Melas included booking a car for only Rs 500 (plus three silver coins given free per booking).

Thus in this case the company is using both it's established dealer network and also Melas where it can meet many people who cannot be reached by its dealer network. Through this the company is able to address the 'accessibility' issue of rural markets, and by employing local sales people it is trying to address the 'acceptability' issues.

SX4 Vs Honda City

SX4 the new car launched by MUL in May did well in the first month in the market, beating the market leader in the segment Honda city by close to 200 cars, but June city is back into leadership position. City has clawed back into number one position the segment with a sale of 2,656 cars versus 1,975 of SX4. MUL has cited the regular maintenance shut down of the plant, the same reason given by Honda on the lower sales of ‘City’ in May. The shut-down lead to lower supplies to the dealers hence the lower sales. One wonders in today's world with the advanced supply chain management systems in place and ERP.... and what not to track the supplies, plan for and monitor manufacturing, can the company not plan for regular maintenance shut-down.I think there is more to what the company's are ready to share; none of the companies want to accept that the sales are down because of reasons other than supply glitches. The car war in the segment has just started and the coming months will show who the winner is, though I have a personal bias towards SX4.

Wal-Mart Back at the top of Fortune 500 List

The latest Fortune 500 List places Wal-Mart as the number one company based on the previous years revenues. The company had been displaced from the top of the list last year by Exxon Mobil. Revenues of the company is at 351 Billion Dollars.The company had been on the top of the list from 2002-2005 and now back in 2007. Five Indian companies have improved their rankings in the list, IOC, Reliance Industries, BPCL, HPCL and ONGC.SBI which made a debut last year has improved it's ranking by three positions.The news item also adds that china has added four new companies to the list taking the total to 24.

Wal-Mart has tied-up with the Bharti Group and is planning an entry into the Indian market. Is it something that Indian consumers should look forward to or will it create too big a threat to the way Indian retail has been operating till now????

Customer Feedback

A few days back I purchased a sandwich maker from one of the leading brands of electrical appliance makers in the country. The product had a two year warranty and my earlier experience with the brand had been good so readily gave the premium for the brand. After the very first use the lights which indicate whether the sandwich is ready stopped working!!!!!!!!!!!!! I took it back to the dealer and he sent it for repair. I got it back in a couple of days with the problem sorted out. But thing which struck me was I was treated as any customer who would have any repair problems with his product within the two year time period of the product, the fact that I was more frustrated because it was a new product was not getting reflected anywhere and I doubt if the information ever got captured at the company's end. Maybe they would have noted the purchase date at the service centre but is that information being passed on to the manufacturing people in the company is doubtful. The damage to the brand is more when the customer experiences problems with the new product.

In his book ‘Pour You Heart into it- How Starbucks Built a Company One Cup at a Time’, the CEO & Chairman of Starbucks Howard Schultz cites many instances wherein the customer comments written in the feedback form were used to improve service and introduce new products. The importance to the comments given by the customers can be seen from the fact that Howard himself would read many of the comments personally. When would we have our Desi companies reach that level of customer responsiveness?

Does market leadership makes one complacent?........

Have you ever observed or thought, why is it that market leaders in a particular product category are not able to carry-on with their leadership when the product category moves into the level technologically? The best example which I can recall is the case of mosquito repellants, initially it started with the "Tortoise brand" of mosquito repellants which were coil based and one had to burn them to smoke away mosquitoes. The next jump in the technology came with the introduction of mats, and it was a set of smaller unknown companies which came with the mat-based repellants , some of whom were later taken over . The next round of improvement in the product offerings came with the introduction of vaporizers and ‘Good Knight’ was the one which captured the market leadership position. The pattern thrown up is that the market leader is not the first one to spot the change in the technology and capitalize on it, leading to the loss of market leadership position in the product category. The question is why does this happen? does the company become too obsessed with the fact that it is the market leader and losses touch with its customers, or that the company is so busy selling the product that in the process it looses focus on the customer 'needs' it is serving. I feel a similar trend can be seen emerging in the water purification business, Eureka Forbes has been the market leader in the segment for a long time, but with the next round of technologies coming in like the Reverse Osmosis machines, the edge is with other companies like Kent RO and others ,,,,,,are we again seeing the cycle repeat as in the mosquito repellant industry....there are many more examples of this phenomenon in the marketing world.

The Market Definition Challenge

As a marketer one needs to "define" the market for the product or service which he is trying to sell. The way you define the market would decide the remaining marketing variables and the competition which you are facing. And that in turn would decide the various marketing strategies which you would adopt. Define it too broadly and the focus might be lost and too narrowly you might end up losing the next big opportunity in your own market. The seminal article ‘Marketing Myopia” by the marketing guru Theodore Levitt in the 1960's emphasized the importance of moving beyond the product and defining the market on the need it is serving.

A few examples, which would help illustrate the concept. The first one was when M S Banga was heading HLL he insisted on defining the market for soaps as a factor of people taking bath and calculate the market share from there on. So even though the company might have a market leadership position in the soaps markets but if the share were to be calculated on the share in the bathing, it would be much smaller because the market defined itself is bigger. Second was the how Jagdish Kattar looks at the markets for MUL products, he says the potential market is the people traveling on two-wheelers and how can the company make products which would be able to break into that market. In the case of MUL, cheaper auto loans did help it tap into the two wheeler market. Similar attempts to break-into other product categories can be seen chocolate manufactures positioning their product as ‘”Snacks”-Nestle Munch, or as a “Energy Bar” – Cadburys Five star. This increases the product usage opportunities, and the market definition is broadened to include other product categories

Corporate Social Responsibility Initiatives ..

Today 'Corporate Social Responsibility' is a concept which is in vogue in the corporate world and it is not because it is suddenly that the corporate world has realized it's responsibility towards the society or that the current government is working towards a more “inclusive” growth. Most corporate houses have their own CSR initiatives and many of them are very well received and appreciated by the community, but today what I will talk about is how the concept is being mis-used by many corporate. The first company is Hindustan UniLever Limited (HUL).The FMCG major is a company known for its marketing prowess and brands in the country, but if one were to read the latest AGM speech given by the chairman Harish Manwani, on would get a feeling as if we are reading the activities done by an NGO not a corporate. I for one believe that the corporate world has to come forward and take the burden off the government in promoting social issues in the country and that is being done by many companies in India and abroad, but saying that they are selling soaps to sell hygiene or to promote women empowerment they have launched project Shakti initiative is stretching the idea a little too far. The case seems to be one of claiming more than their fair share in terms of media attention and credit than they deserve. Similarly Coca Cola has come has entered into a tie-up with WWF to support freshwater conservation and freshwater bio-diversity around the world. And they have announced a $2.05 million fund for the same, which according to analysts is pocket money compared to the turnover of the company and the expenses it would incur on normal product launches and promotions. The publicity and benefits that company would like to draw out of it would be much much higher, which in itself is not a bad thing but if done with the right intentions. I also had an opportunity to listen to one of the senior executives of coke in India making a presentation on the various rural initiatives like Jalsa, Chaufaulla, ‘Thums Up Rural Games’ in villages across the country. It was as if each of these initiatives was directed at promoting the local culture and events and it was only incidental that the entry to events was only to people who purchased Thums Up....

Car for "Bottom of the Pyramid" Customers!!!!!

A car for one lakh rupees. This is what many automobile companies are trying to build. Our home grown Tata Motors and the infamous Singur small car plant is supposed to be working full-time to launch the car by mid of next year. The Forbes magazine calls it the next people's car after Ford's Model T, Volkswagen’s Beetle and the British Motor Corp's Mini. Apart from Tatas the companies which have expressed their interest in building the ultra lost car includes Nissan along with Mahindra and Mahindra, Honda motors, Hero group of Munjals and Bajaj Motors. The question is what is so special in rupees1 lakh car? Accepted that pricing itself is one big selling point. I think it at this time it is worth while to remember the pioneer of low-cost cars , Henry Ford. People consider him to be a production genius who introduced the assembly line manufacturing system to the world, but marketers believe his true genius was in the fact that he calculated the price which would make a car affordable to most people in the US and working backwards he came up with a manufacturing design which we know as assembly line manufacturing. The initiative to come up with a rupees one lakh rupee car is an initiative in the same direction, at the price of one lakh the a car would become affordable to many Indians who travel in two wheelers and public transport. The appeal of the low-priced car would not be limited only to India but would be in demand in most emerging countries, China, Brazil and so on. With the car markets in the US and developed world getting saturated it is these markets which would be able provide the growth for the automobile manufactures. The Forbes article claims that the one lakh rupee car from Tata Motors would represent a victory for those who advocate making cheap goods for potential customers at the 'Bottom of the pyramid".